Higher Rock Education - Economics Blog

Friday, July 21, 2017
My country, the United States, is in a heated debate over health care. This is the first of a series of blogs related to health care in other countries. I have asked many of our international contributors to write about a personal experience related to health care in their country, which will be included in a summary of that country's health care system. I am not an expert on health care, and I will not express my opinion on the best solution. My objective is to describe how other countries deal with health care issues in hopes of furthering this very important discussion. No system is perfect, and I believe much insight is gained from learning the advantages and disadvantages of other systems.

Germany has been offering universal health care for over a century. Their health care system is not state run, but it is heavily regulated. Everyone is required to be insured by either the compulsory system or private insurance. The cost of the compulsory program is shared by employees, employers, and the government. Monthly fees for the compulsory system are not based on age, or preexisting health related conditions. Instead a person's premium is a function of his or her income. Individuals employed by a company have 8.4 percent of their income deducted from their paychecks. Their employer contributes an additional 7.3 percent, bringing the total to 15.7 percent for each employee. Self-employed individuals pay more if they choose the compulsory system because they must pay the employer and employee's portions. Non-working dependents are covered free of charge. (See German Health Insurance Options.) Because the amount paid is dependent on income, a young healthy individual earning 30,000 Euro would pay more than someone earning 20,000 Euro with a chronic disease.

The money is deposited into a government supervised central fund, which in turn distributes the money to approximately 118 non-profit insurance companies. The insurance companies compete for business, but each company must offer the same minimum coverage, which includes: medical, dental, psychiatric, rehabilitation, and most medications. No one can be denied coverage or charged more – even if an applicant has a preexisting condition. Competition has induced many companies to offer additional services. For example, many insurance companies cover preventative programs hoping to reduce the insured's future need for medical care.

People covered by the German system have the option of purchasing private insurance if their income exceeds 57,600 Euros. In 2014, approximately 11 percent of the population chose private insurance. There were 42 companies that competed for their business. (The Commonwealth Fund) Unlike the compulsory program, premiums are not based on income and the insurance does not cover dependents. Instead age and health are considered when assessing the applicant's risk. The assessment is only done at application and the premium is based on lifetime coverage to minimize the possibility of rapidly escalating premiums as a person ages. These policies can also be patterned to the individual's needs, so the plans can provide a wider choice of treatments. Wealthier and self-employed individuals may find private programs less expensive than the compulsory system.

The German health care system is becoming less sustainable because it is experiencing escalating costs, and a smaller pool of workers per insured to cover the higher cost. Medical costs continue to increase as the sophistication of medical equipment improves at an ever-faster rate and out dated equipment is replaced more frequently. Physicians are limited on what they can charge. They are paid on a fee for service basis based on a uniform fee schedule negotiated by all the insurance companies and doctor's associations. A medical practice can increase its profits by performing the most expensive test when a less expensive treatment would be adequate.

The revenue source is being squeezed. The German population is one of the fastest aging populations in the world. In February 2017, 21.2 percent of Germans were 65 or older. (WorldAtlas) As the population ages, medical costs escalate while the number of workers contributing per recipient is decreasing. The aging population is making the system less sustainable without a tax increase since a tax on wages funds the system.

Here is our contributor's story:

All German citizens, and permanent residents are required to have health insurance... We have two options. The compulsory plan has a fee determined by our income, or if your income is high enough, you can buy private insurance.

I was skeptical about the German system when I first learned I had to buy insurance. After all, I did not have to buy insurance when I lived in the UK. My care was furnished by the government. I am healthy and earn a high wage. Why should I pay more for my insurance than someone who earns less and is sicker than me? What if I did not get sick? Where is my money going? After a horrifying experience, I understand the idea of a society sharing medical costs and appreciate the security of knowing my medical needs will be paid for if I, or anyone in my family, gets sick.

Several years ago, my son was sick and rushed to the hospital. When we arrived there was little paperwork. He was tested and treated without delay, and I was overwhelmed and relieved. I was able to care for my son without worrying about how I would pay for our medical bills. It occurred to me that since everyone is insured, physicians and hospitals are not concerned about being paid, which makes it easier for them. They can treat patients regardless of the cost and severity of the sickness. I am glad I do not live in a country where you are required to pay before you can receive treatment.

In conclusion, I prefer the German health system to the UK's system. Several of my friends that still live in the UK have complained about enduring pain while waiting months before receiving needed, but not urgent, treatment. I do not think that would be an issue in Germany. The "compulsory" insurance policy is an excellent initiative because it provides peace of mind that we will receive excellent treatment in a reasonable time without being a financial burden.

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